Nudging service providers and assessing service trade-offs to reduce the social inefficiencies of payments for ecosystem services schemes

Abstract

Socially inefficient payment for ecosystem services (PES) schemes result when adverse shifts in the provisioning of other ecosystem services (ES) or overpayment to service providers occur. To address these inefficiencies, a holistic evaluation of trade-offs between services should be conducted in parallel with determining land owners’ service provisioning preferences. Recent evidence also suggests that nudging stakeholders’ preferences could be a useful policy design tool to address global change challenges. Forest owners’ landscape management preferences were nudged to determine the impact on the social efficiency of PES schemes for biodiversity conservation and climate change mitigation in Finland. ES indicators for biodiversity conservation, carbon storage, and the albedo effect were included with traditional provisioning services (i.e. timber) and bioenergy to assess the consequent intra-service trade-offs. Synergies in provisioning of regulating services were identified, but were found to be more efficient when the management objective is for biodiversity conservation rather than climate change regulation. Nudging led to marginal gains in service provisioning above the baseline management and above neutral owner preferences, and increased aggregate service provisioning. This demonstrates the importance of considering intra-service trade-offs and that nudging could be an important tool for designing efficient PES schemes.